Oil Crisis Laid to U.S. and Industry

The U.S. government and the oil industry, in different was and for different reasons, have combined to produce an artificial crisis of energy "underdeliverability," according to a study released yesterday by Energy Action, an energy-consumers' organization.

The industry, faced with excessive oil inventories in 1978, dramatically cut refinery production and drew down sharply on its oil reserves.

Later, during the Iranian revolution, the Carter administration created a false panic by forecasting extreme cutbacks-which Energy Action said never really materialized-in oil imports. This induced hoarding and panic-buying, which further reduced available supplies.

In both cases, the result is the same; long gasoline lines in some areas and rising prices, the study said, adding that the policies and actions which led to the current situation are continuing.

Energy Action is a privately financed lobby and research organization. Critical of the oil industry, it was set up several years ago to coutner the industry's power in Washington.

Meanwhile, in an unrelated appearance, the chairman of Exxon, the nation's largest oil company indirectly disputed the thrust of the Energy Action study.

The study, which based its conclusions largely on Energy Department statistics, stopped short of seeing a vast "conspiracy." But it said the effect has been the same.

Government officials believe "that a good dose of 'underdeliverability' is the only way they can think of to constrain gasoline demand, without regard to the lives, jobs, time and temper of a public which believes that driving is a necessity in modern America," the Energy Action study said.

"And, of course, the oil industry is glad to oblige, since that same dose of induced shortage helps inure the public to otherwise unacceptable price-gouging."

James Flug, director of Energy Action, presented the study at a media-event news conference in front of a closed BP gasoline station on Connecticut Avenue in North-west Washington.

The Current problem, according to the study, actually began in spring 1978, when the oil industry dramatically drew down its fuel oil and gasoline stocks at the same time it ran refineries "well below capacity."

The study said that by the time of the Iranian revolution, the industry had "decimated" product stocks. Instead of helping the situation ("warning lights should have been flashing all over the industry and the government"), the government, with little justification, began "deliberate attempts to panic the American people into believing that a pause in Iranian oil production was having dire impacts on American crude oil supplies. . . ."

"The resultant panic, predictably, caused various forms of hoarding, topping off, increased user storage and other behavior" that further depleted stocks and made demand appear higher than it actually was.

Similar policies are continuing even now, the study said. Assuming that there will be inadequate supplies of home heating oil for next winter, the government is allowing industry to "cut back sharply now on current gasoline deliveries" at the same time refineries are producing below capacity.

There is "inadequate evidence" of a winter shortage, the study siad, to justify these actions.

Meanwhile, Clifton Garvin, chairman and chief executive officer of Exxon, said the real problem at present is simply excessive demand from the public. "We're running the refineries with as much crude oil as we have," he said on "Face the Nation" (CBS, WDVM). "Unfortunately it just doesn't meet the demand the public is putting on it.

"With the amount of crude available to us and with a desire to get to the winter period with a minimum inventory of heating oil," Garvin said, "Exxon is only going to be able to have about as much oil in the market as we did last year."

With increased driving, Garvin said, the current "spot situations" (gasoline lines) will continue. "I personally don't think that's so bad," he said. "I don't look at this as a crisis situation. I look at this as a serious problem."

Fred Barbash, the editor of Morning Mix, is a former National editor and London bureau chief for The Washington Post. He has also been an editor at Politico and Reuters, and was the managing editor of CQ Weekly magazine.